Investment Shastra

Investing in Equity for Beginners and Small Investors

Investing in equity for beginners and small investors

How should a beginner or a small investor invest in equity?

The answer widely available and promoted widely is ‘SIP karo’-invest in mutual funds through SIP.

Even if you have some lumpsum to invest chances are that you will be told “don’t take the risk of investing in one go, SIP karo”.

Some will suggest a few funds with the “best past returns”. And then quickly you will be told how simple it is to invest in MF, “App download karo aur invest karo”

For some reason, beginners and small investors are expected to be satisfied with these answers-answers that may be right if all you can invest in a few thousand every month but not if your lumpsum and monthly savings are a more than that.

Yes, it has become very easy to buy MF but it is not easy to invest in it successfully.

Challenges faces by new investors

  1. May want to invest in stocks but most advice is only on mutual funds.
  2. Need to deploy their lumpsum savings but most advice is on SIP in mutual funds.
  3. Everyone agrees that selecting mutual funds based on past performance is inadequate and incorrect but most advice is based on past performance.
  4. Market is ever-changing but most advice is one- time
  5. Selection and Portfolio management is not simple enough
  6. Don’t really learn how to invest in equity

There is a need for an investing solution beyond SIP in MF for beginners and small investors. So we decided to design a solution that addresses all the above challenges faced by them.

For whom: If your total investment i.e the lumpsum + 12 times the monthly savings you want to invest in between 1 to 5 lacs you need a better solution to investing than SIP in MF. Read on

What do you need? You need to invest your lumpsum and monthly savings in Stocks, Mutual and Index funds. You need to manage this portfolio i.e. buy, sell or hold these as the market goes through it ups and downs. And you need to do this with some understanding of the process and not just act blindly on someone’s recommendations.

Stocks, Mutual and Index Funds all have their advantages and with proper guidance, you can take advantage of all of them.

What are the benefits of investing in Stocks?

Investing in individual stocks gives you a higher level of control over your portfolio, where you can choose your allocation based on a specific industry and quickly exit once you earn a sizable profit. Since you are in control, there are no additional overheads like fund manager fees. Finally, your decisions are not impacted by external factors as is the case in a Mutual Fund, eg redemption pressure, large inflows, fund manager exit, etc.

What are the benefits of investing in mutual funds?

Mutual funds help you diversify easily with a very small investment. A typical MF holds around 50 stocks in its portfolio, thus presenting lesser risks if one stock was to perform poorly. A dedicated fund manager who understands the Indian markets actively monitors and oversees the fund so that inexperienced investors don’t have to sweat it. MFs make it easy for beginner investors in India to follow a disciplined way of investing through.

What are the benefits of investing in index funds? 

An Index Fund is a mutual fund where the portfolio of stocks is not actively selected by a fund manager but is a replica of the Index eg the Nifty 50 Index Funds’ portfolio matches that of Nifty 50. Mutual funds are called actively managed funds while investing in index funds is called Passive investing. The advantage of an Index fund is that its portfolio is predictable and it comes at a lower cost. So you get the benefit of diversification at a lower cost. However, the decision to invest in Index funds is similar to any mutual fund.

How do you invest in Stocks, Mutual and Index funds?

The answer is Think Portfolio! Ensure you have a diversified portfolio of strong companies and MFs.

But how do you select a portfolio of stocks from amongst a larger set of strong companies and MFs. The answer is you select the ones which have an attractive upside potential.

This prevents you from buying at expensive prices-thus avoiding the risk of mediocre returns and sharp fall in case the market/stock corrects for whatever reasons.

How to implement this?

It is not feasible for a beginner to screen stocks and MFs and select the ones to invest in. This is the job of your advisor. However, you should not be expected to follow someone’s advice blindly. What you need is to understand the process followed in making the recommendations and enough transparency to know that due process has been followed. This will enable you to invest confidently and stay invested.

When we search for a solution based on all the above- advice to build a portfolio of stocks, mutual and index funds to invest both lumpsum and monthly savings and provided transparently; we found that there is nothing available for beginners and small investors. So we decided to build one

MoneyWorks4me PRO

With PRO you will be able to invest

  1. In a portfolio of strong company stocks with an attractive upside potential
  2. Lumpsum in a set of funds with attractive upside potential
  3. SIP in a set of funds with different investment styles

You have the flexibility to choose where you wish to invest and how much. We recommend investing your lumpsum equally in the stock portfolio and in MFs for better returns and a diversified portfolio.

The PRO Dashboard is designed to give you the most important decision related information right there

  • For stocks, you can see how it is rated on its 10-year performance, Future Prospects, and its Upside Potential.
  • For MFs you can see its Investing Style (Momentum, Quality, Value, Small Cap), Fund Quality (as compared to other funds) and it Upside Potential

An analyst note explains the rationale for the recommendation in brief. And you will be able to get further details when you click the stock or fund name.

You can also do the stock transactions from the PRO Dashboard.

If your trading account is either ICICI Direct or available on the smallcase gateway (Zerodha, HDFC Sec, IIFL, Edelweiss, 5 Paise, and Alice Blue) you can safely and conveniently complete the transaction using the APIs on the PRO Dashboard.

This convenience enables you to SIP in the stock portfolio if you do not wish to SIP in MFs.

Finally, when you transact from the PRO Dashboard your portfolio is automatically updated in the Moneyworks4me Portfolio Manager (which has many benefits).

Visit the site to understand PRO better and see a video of how simple it is to use.

Click here to view our plans and sign up.


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Stock Investing
Mutual Fund Investing

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Stock Investing
Mutual Fund Investing

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Raymond Moses - Founder, MoneyWorks4me

Raymond Moses - Founder, MoneyWorks4me

Founder- Moneyworks4me, has over 36 years of experience. After graduating from IIT Kanpur in 1983, he worked with Hindustan Unilever and Castrol. He is the Founding Director of The Alchemist's Ark-a business consulting, training and e-learning company with many market-leading companies as clients. Since starting Moneyworks4me in 2008, he has worked to make investing advice effective, transparent, simple and accessible to Retail Investors.

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